The Cost/Benefit Analysis Project

A COST/BENEFIT ANALYSIS OF THE CAROLINA ABECEDARIAN PROJECT AND THE CAROLINA APPROACH TO RESPONSIVE EDUCATION

This project presents a cost/benefit analysis of the Carolina Abecedarian Project and the Carolina Approach to Responsive Education (ABC/CARE). ABC/CARE targeted a group of disadvantaged families with children born between 1972 and 1979 in Chapel Hill, North Carolina. The intervention was randomized, with the treatment group receiving center-based childcare from birth though age 5. Rich data on the individuals are collected through age 35.

We calculate the effect of ABC/CARE on life-cycle outcomes including health, employment, education, and crime. These treatment effects account for the fact that about 75% of the control group attended alternative center-based childcare (see Figure 1).

In order to calculate the life-cycle benefit/cost ratio and internal rate of return of the program, we need to understand the impact of ABC/CARE beyond age 35. To predict the later-life outcomes of the ABC/CARE subjects, we use auxiliary datasets that contain longitudinal information on individuals beyond age 35. We project income, welfare participation, crime, and health. Table 1 lists the auxiliary datasets we use for these projections.

The main estimates for the net present value of the treatment effects on the different components are presented in Figure 3. These net present values give the benefit/cost ratios and internal rates of return in Table 2. The pooled estimate of 6.29 implies that ABC/CARE is a cost-effective early childhood intervention.

Frequently Asked Questions

1Is it feasible to expand ABC/CARE?

Scaled up versions of ABC/CARE have been implemented in many settings. One example is the Infant Health and Development Program (IHDP), implemented for over 1,000 children in 8 different states. The high rate of return estimated in this project supports further expanding programs similar to ABC/CARE for disadvantaged children.

2Why are cost/benefit analyses useful?

Cost/benefit analyses allow academic results to be tangibly translated into policy action. Given there are constraints on government resources, it is important that the costs and benefits of public programs are considered when planning governmental budgets and investments. Some critics of cost/benefit analyses disparage the reliance on assumptions. Some examples include assumptions about costs, discount rates, marginal rates of taxation, in addition to program-specific assumptions. In order to present robust estimates, we calculate the results altering different parameters. The estimates we present are largely robust to these alterations.

Figure 1: Control Substitution, Cumulative Enrollment

Figure 3: Net Present Value of Main Components of the Cost/Benefit Analysis Over the Life Cycle per Program Participant, Treatment vs. Next Best